The Biden administration is exposing so-called junk fees in the housing rental industry in an effort to make the actual cost of housing more transparent to consumers.
President Joe Biden announced the initiative on July 19 at a meeting of the White House Competition Council, an inter-agency task force formed in 2021 to combat unfair competition in certain industries and lower prices for consumers.
The initiative includes commitments from major real estate sites to provide complete fee information with each listing and legislative remedies being pursued by several states.
“We’re cracking down on hidden junk fees in rental housing,” Mr. Biden said. “Folks at home are having to pay $100 or more just to fill out a rental application, even though the credit check can cost as little as $20.”
“Some [landlords] accept applications of hundreds of potential tenants, far more than they could seriously consider renting to, just to collect these fees,” he added. “It’s simply not right, and we’re going to move on it.”
The action is intended to lower prices by increasing competition in the rental housing market.
“When companies have to compete, it means lower prices, fair wages, and more innovation,” Mr. Biden said.
Ariel Nelson, an attorney at the National Consumer Law Center (NCLC), hailed the initiative.
“Rental housing junk fees put safe and decent housing even more out of reach because renters must pay them on top of sky-high rents. We are greatly encouraged that the Biden Administration is taking rental housing junk fees seriously, and we recognize that the measures announced today from private companies are steps in the right direction,” Ms. Nelson said.
Some real estate professionals defend the fees targeted by Mr. Biden’s initiative as providing needed cash flow to landlords, though most agreed the increased transparency would benefit consumers.
Many rental properties charge fees of various kinds in addition to rent. That may include fees for submitting a rental application, keeping a pet, pest control, mail sorting, trash collection, as well as deposits for rent or damage. Some landlords charge a “January fee,” an annual charge with no defined purpose.
Though not illegal, these fees often are not specified in real estate listings, making it difficult for prospective tenants to compare the true cost of renting with other properties before submitting an application.
Due to a nationwide tightening of the rental market, more renters are applying to more than one rental property and therefore incurring multiple application fees, according to the Department of Housing and Urban Development (HUD). After moving in, some tenants face eviction for failure to pay additional fees despite being current on rent.
“The fees associated with rentals are significant,” Armstead Jones, a Baltimore-based real estate consultant, told The Epoch Times. “Most of the time, the advertised rent and rent-plus-fees are $200 to $400 different. Most renters don’t know the bottom line cost of the apartment until the first billing cycle.”
Just over 30 percent of U.S. housing is occupied by renters, according to the U.S. Census Bureau. U.S. renters had a median household income of $36,000 in 2017, with median monthly housing costs of $991. Fully 50 percent of renters were “rent burdened,” having housing costs of at least 30 percent of household income. Half of those, 25 percent of all renters, had housing costs of more than 50 percent of their household income.
“From a real estate owner’s perspective, these fees are important as the landlord would otherwise need to pay those out of their own pockets,” Sebastian Jania of Ontario Property Buyers told The Epoch Times.
“By putting these expenses onto the tenant, the landlord does not need to increase the rent amount itself in exchange for covering those expenses. This makes the rental price look a little bit more attractive to tenants,” Mr. Jania said.
That also adds a barrier for some prospective renters, according to Sipho Simela, founder of Matrix Rental Solutions.
“The current system’s lack of transparency and potential discrimination against certain renters based on their income sources can be a cause for concern,” Mr. Simela told The Epoch Times. Technological tools can address that problem, he said. “When technology is standardized through a Universal Rental Application, property owners can create a more equitable marketplace by attracting a diverse pool of potential tenants, thus, maximizing affordable housing accessibility without compromising business interests.”
“In my many years of experience, the most contentious aspect of a rental agreement is usually over the fees,” Dottie Herman, vice chair and former CEO of New York-based Douglas Elliman, told The Epoch Times. “Transparency would be very effective in eliminating a lot of the mystery going into a lease, especially with what are now called ‘convenience fees’ which is a fancy way of saying if you pay rent online, you’re going to be charged more money.”
“I think that transparency will help improve owners’ reputations as being more honest and open as an industry,” Ms. Herman added.
Part of Bidenomics
The White House touted this plan as the latest installment of Bidenomics, the president’s plan for stimulating the economy by reducing prices, increasing competition, and supporting small businesses.
“We have taken to eliminate hidden junk fees and high costs in air travel, healthcare, banking, and hearing aids that are all saving families hundreds and sometimes even thousands of dollars a year. The Council’s work is another example of Bidenomics at work, lowering costs and creating a more level playing field for small businesses, entrepreneurs, and also workers,” White House Press Secretary Karine Jean-Pierre told reporters on July 19.
However, some business leaders believe Mr. Biden is exercising too much control over the private sector.
“This Washington-knows-best approach will raise prices for families, lead to fewer choices for consumers, and make our economy less competitive,” Neil Bradley, the U.S. Chamber of Commerce’s chief policy officer, said after the last meeting of the competition council.
Ms. Jean-Pierre insisted the council’s actions will ultimately benefit consumers.
“We’re very confident in the actions that we announced today,” she said, referring to actions already taken to avoid surprise costs for medical treatment. “Competition is a key pillar of Bidenomics, and it is part of the president’s agenda. We believe it’s going to lower costs for American families in targeted areas.”
A poll released by Monmouth University on July 19 indicates that 62 percent of respondents disapprove of the president’s handling of inflation. Opinion was evenly split on his handling of jobs and unemployment.
The White House insists that economic data paints a different picture.
“Over the past year, we’ve seen a dramatic decline in inflation. It dropped by two-thirds, down to 3 percent, at a time when unemployment has been below 4 percent for the longest stretch in 50 years,” Mr. Biden said.
“The experts said to get inflation under control, we need to lower those wages and drive up unemployment. But I’ve never bought that; I don’t think the problem in America today is too many people working or [that] working people are making too much money,” Mr. Biden said, adding that his focus is on fixing the supply chain and lowering costs.
Opinion polling presents an incomplete picture of economic progress, according to Ms. Jean-Pierre.
“The polls don’t tell the whole story,” she said. “The data shows the combination of unemployment and inflation is at near-historic lows. That’s why we have seen consumer confidence increasing, and also wages are rising.”
Major Rental Sites Onboard
Several major housing sites have announced that they will provide shoppers with a complete picture of rental costs with their listings, including a clear statement of fees to be charged in addition to rent.
Zillow launched just such a feature on July 19. Each listing now states the monthly rent, one-time fees, and recurring fees. Zillow’s rental listings draw some 28 million unique visitors each month.
Apartments.com will launch a calculator tool this year that shows the full cost of renting each of its more than 385,000 listings.
AffordableHousing.com will require landlords to include all fees, refundable and non-refundable, as well as other one-time charges, in rental listings. The site also intends to create a “Trusted Owner” badge for renters who have demonstrated that they adhere to best practices, including setting reasonable limits on fees and disclosing them fully.
Several states have taken steps this year to address the issue of fees attached to rental housing.
Colorado enacted a law that allows prospective tenants to refuse a rental application within 30 days without incurring an additional fee. Another Colorado bill limits certain fees, including the markup that can be added to third-party services.
Rhode Island took action to limit rental application fees that exceed the cost of obtaining a background check or credit report.
Minnesota enacted a measure mandating that landlords clearly display the total monthly rent and all nonoptional fees on the first page of a lease agreement and in all advertisements.
Connecticut prohibited landlords from charging application fees and established a limit of $50 on fees for obtaining tenant screening reports. The state also banned move-in and move-out fees and late fees for utility payments.
Maine prohibited landlords from charging fees in excess of the actual cost for conducting a background check, obtaining a credit report, or performing other tenant screening.
Montana mandated that application fees be refunded to consumers who were denied a rental, except for the cost of reviewing the application and conducting a background check.
The California senate passed a bill that would prohibit certain rental fees and require landlords to disclose others.
The White House hosted a gathering of legislative leaders in March, where it drew attention to the problem of hidden and unfairly high fees for renters.
The U.S. Department of Housing and Urban Development released a best practice guide on July 19, listing strategies for improving transparency and fairness in rental housing fees.
Mr. Biden also announced initiatives to reduce food prices and released proposed guidelines on corporate mergers for public comment on July 19.
The Associated Press contributed to this report.